Posted on 06 April 2012.
Finding Bear Market Stocks That Have Big Profit Potential
A common misconception of people that do not understand the stock market is that bear markets are times to sell all stocks and hold only cash to avoid losses from bear market selloffs.? They do not realize that there are bear market stocks that offer opportunities to make money in the stock market during bear markets.? The key to making money on bear market stocks is to understand how to find bear market stocks and to invest in them at the right time.
During bearish stock markets, bear market stocks have historically outperformed the overall stock market and have become a safe haven that many investors use to ride out bear markets.? Bear market stocks include conservative dividend paying stocks, such as utility and consumer staples stocks.? Bear market stocks are essentially the stocks of companies that offer products or services that consumers will continue to buy regardless of the state of the economy.
During an economic recession, consumers make it a priority to pay their utility bills and buy consumer staples, such as basic food items and household consumer goods.? Savvy stock market investors realize this and buy utility and consumer staples stocks. ?This is why utility stocks such as Pacific Gas and Electric (PCG) and Consolidated Edison (ED) and consumer staple stock such as Proctor and Gamble (Symbol: PG) and Colgate-Palmolive (Symbol: CL) typically outperform the broader stock market during bear markets, and are good bear market stocks to invest in.?
When to Invest In Bear Market Stocks
The time to consider investing in bear market stocks is when it is evident that a bear market is occurring and is likely to remain for a number of months due to poor economic conditions.? While stock market investors sweat out a bear market, many savvy investors buy bear market stocks and get paid via dividends to wait for better stock market conditions.? It is important to remember that the stock market will often hit its bottom during the middle of a recession and start moving higher thereafter, even as the recession continues, in anticipation better economic times ahead.? Therefore, the time to sell bear market stocks and invest in bull market stocks is during the middle of a recession, when the economy seems bleak and appears to have hit bottom.
A good way to trade bear market stocks is to make a list of bear market stocks before a bear market occurs.? Identify the bear market stocks that did well in prior bear markets.? While not every bear market is the same, and the performance of companies can and often does vary considerably from one bear market to the next, there may be some excellent bear market stocks buying opportunities that can be identified by looking at the past performance of stocks during prior bear markets.
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